Mondelez International Inc. plans to combine its coffee business with D.E Master Blenders 1753 B.V. of Europe to create a more formidable rival to Nestlé SA in the battle for the world's bubbling coffee market.

Under the deal announced Wednesday, Mondelez will hand over its coffee brands, including Gevalia and Jacobs, in exchange for $5 billion in cash and a 49% stake in the new company, to be called Jacobs Douwe Egberts. The combined company, which will be based in the Netherlands and will also include Master Blenders'...